How to use a Paycheck Calculator to Save For Retirement
Author: Siân Killingsworth / 17 Jan 2023 / 401(k) Plan Information, Personal Finance
It’s not always easy to figure out how much money you need to save for retirement. When your employer withholds money from your paychecks for federal and state taxes plus Social Security and Medicare, it can be difficult to know how much you can afford to put away for your future. And you may be hesitant to take money out of your paycheck that you may need for normal expenses like your mortgage or rent, food, childcare, etc.
That’s why we recommend using a paycheck calculator. It takes the guesswork out of figuring out how much you should be saving each month, and it helps put your exact income into context.
What is a paycheck calculator?
A paycheck calculator is an online, easy-to-use tool that helps you figure out how much money will be in your paycheck after various deductions, including retirement contributions. The tool will take several pieces of personal information into account:
- Your current salary
- The frequency at which you are paid (weekly, bi-monthly, etc.)
- Tax filing status (married, single, etc.)
- Other income sources such as earned interest
- Federal and state taxes
- Other deductions, such as health or dental insurance expense
- Current retirement contribution
- Proposed new retirement contribution
Why use a paycheck calculator?
A paycheck calculator is a tool that helps you understand your finances better so you can make informed decisions about your financial future. It identifies how much money will be in your paycheck after taxes and all other deductions.
It gives an accurate picture of what’s happening with your income and spending, which helps prevent nasty surprises when it comes time for an emergency or some other major expense. And finally, it can help you stay on top of planning for your retirement.
How much money do you need to save for retirement?
This totally depends on your retirement goals, your income, your savings, and the lifestyle you wish to have in retirement. Most employers do not offer pensions, and Social Security is dwindling, so your best course of action is to maximize your own retirement savings while you can.
Your annual 401(k) contribution is subject to maximum limits established by the IRS. For 2023, the maximum contribution for this type of plan is $22,500 per year for individuals under 50 and $30,000 for individuals 50 or older. Employer contributions do not count toward the IRS annual contribution limit, which is good news for those whose employers make these contributions.
Try Ubiquity’s Paycheck Calculator to see how increasing your 401(k) contribution will affect your paycheck amount – and your financial future. It will save you time and stress in the long run by eliminating guesswork.
Ubiquity is not a registered investment advisor and no portion of the material herein should be construed as legal or tax advice. Please consult with your financial planner, attorney and/or tax advisor for advice.
